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Why Yamana Gold, Inc. Stock Rose 53.6% in April

By Reuben Gregg Brewer - May 9, 2016 at 11:35AM

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Yamana Gold's shares rose with the price of gold but were helped along by a strategic acquisition, too.

What: Yamana Gold's (AUY 2.37%) shares rose by an impressive 53.6% last month. That was a lot more than the 30% or so advances that Barrick Gold and Newmont Mining posted in April.

So what: Since all three of these companies are precious-metals miners, you can't get away from the fact that gold and silver both advanced in April. That, then, is one of the main reasons this trio saw higher stock prices. But there's more going on at Yamana.

Yamana's costs for mining gold are fairly low. However, it's been having some trouble getting a pair of mines in Brazil to operate at expected levels. The company has been repositioning assets in an effort to deal with this issue, basically rolling a few mines into one division. It appeared that the goal was to sell off these assets, but that didn't work out as planned, and by the end of 2015 the company announced plans to keep the mines in house. Then, in April, Yamana completed the acquisition of another Brazilian mine that should help improve the prospects of its Brazilian operations.

The deal was a bit complex and involved some trade-offs on the copper side of the business. But CEO Peter Marrone explained it this way: "We will be significantly increasing potential future cash flow from gold for a modest reduction in future cash flow from copper." This bit of good news probably helped push Yamana shares a little higher than other miners.

Now what: With relatively low operating costs, Yamana looks well positioned for the precious-metals rally currently taking place. And the addition of the new mine in Brazil should help support a weak link. Investors looking for precious-metals exposure should take a look here. That said, Yamana has a number of projects in the works to expand its production. If any of these efforts don't live up to expectations, like the mines in Brazil, Yamana's outlook might not be as bright as hoped. Just something to keep in the back of your mind, based on the miner's recent history.

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